Are there really this many bad deals?

139 Replies

So I am looking to purchase my first property in Ewing New Jersey (after looking at multi family (2-4) in other parts of jersey and NYC), and after doing about 20 calculations for rental properties in the area, and it seems that I have only found 2-3 that even positively cash flow and 1 that would give a significant amount of cash flow (over 10%). Being new, I am wondering if I am being too overprotective with some numbers for the costs for some homes, or is that on average How difficult it is to find a good deal?


@Antonio Cucciniello , not every market is a good cash flowing market. Also, keep in mind that NJ is known as being a tenant friendly state (not a landlord friendly state). I'm in Northeast PA. Thankfully my local market has some affordable cash flowing B/C class properties. 

Since, you are just talking about analyzing properties, what purchase price are you using for your calculations? The asking price?

If you want to see if reasonable deals are found in your area, perhaps analyze a few multifamily properties that recently sold. In those cases, you can use the actual sale price which may be substantially lower.

I myself am about to close on a small single family home, where I negotiated 40% off the asking price. Obviously that is NOT the norm, but if a listing is brand new on the market it may sit a while and have a couple price reductions before selling. So, the sale prices might be somewhat lower than you are thinking. 

For every 100 deals I run through of 2-4 units I send out maybe 2 or 3 of them to clients so around 2-3% of deals cashflow in nice area. You have to understand though those other 97% aren't bad or they wouldn't be selling they just aren't for you. Lots of people buy with higher down payments or look more to live in unit and focus on appreciation/paydown/rent growth. 

If property appreciates 2.5% a year at 25% down that's a 10% return. If you are house hacking and put 5% down you just made a 50% return in 1 year. Huge!  

The mortgage principal paydown comes to 5-7% return depending on rate at 25% down. 

Like the others say you have to run ALOT of deals to find the good ones. For example Kansas City's market supply is 2.4(anything below 6 is a sellers market) and prices since 2016 have risen 180K-225K. You also have to look at your numbers and adjust to the market. There is a mix of things to look at but don't wait to invest. Always a great time to invest :)

Sometimes it is a matter of figuring out what you need to pay to make the property cash flow. Offer that amount. It may be that they will reject the offer. That is fine, move on to the next one and keep doing that until you find someone who will sell at a price that works for you. It could be, that area just doesn't have what you need and you will need to look somewhere else. It could be, people have over priced and are willing to lower their price. It might be that the place will sell to someone who didn't really analyze the numbers or someone who buys for appreciation and has enough money they aren't worried about their current return.

@Antonio Cucciniello

As A full-time investor in Cleveland

I soft appraise 100 houses a month. View 30. Appraise 20. Offer 10. Get 1.

The more you pencil deals, make offers, make mistakes the better you’ll get at creating mental shortcuts.

Market conditions are still in favor of sellers. Buyers are buying owner occupant or investors would prefer real estate vs stocks. Bond yields are getting chased lower and lower by the tide of boomers returning IMO looking for cash flow.

There will come a day again when the buyers seat will rule the market....but damn this is taking forever 😆.

Keep running numbers you’ll get better and faster over time! Golden rule in investing that has served me well...Be patient.

Each market will have a different % of good deals and bad deals. Each market will also be different in what it offers.  Some are cash flow markets some are not. You need to understand what it offers then you can know what a good deal is in a given market.

Originally posted by @Kevin Sobilo :

@Antonio Cucciniello, not every market is a good cash flowing market. Also, keep in mind that NJ is known as being a tenant friendly state (not a landlord friendly state). I'm in Northeast PA. Thankfully my local market has some affordable cash flowing B/C class properties. 

Since, you are just talking about analyzing properties, what purchase price are you using for your calculations? The asking price?

If you want to see if reasonable deals are found in your area, perhaps analyze a few multifamily properties that recently sold. In those cases, you can use the actual sale price which may be substantially lower.

I myself am about to close on a small single family home, where I negotiated 40% off the asking price. Obviously that is NOT the norm, but if a listing is brand new on the market it may sit a while and have a couple price reductions before selling. So, the sale prices might be somewhat lower than you are thinking. 

I am looking in the less than 200K range but I first run the numbers with the asking price then and I play with the asking price to see if I can get a good deal at a certain price.  Multifamilies are few and far in between, but I will look at those for some guidance.  

 

Originally posted by @David Abbate :

@Antonio Cucciniello Most markets across the country are sellers markets right now, and yes, it is difficult as hell for the rest of us to find good deals right now. 

 

Glad ok, just trying to understand! thank you for shedding some light!

Originally posted by @Theresa Harris :

@Antonio Cucciniello  IF you ran numbers on 20 properties and 2-3 resulted in >10% cash flow, that's pretty good.  Most homes are bought as primary residences, not as rentals.

 Only 2-3 positive cashflowing, 1 over 10%. So 5% rate with my small sample size!

Originally posted by @Henry Lazerow :

For every 100 deals I run through of 2-4 units I send out maybe 2 or 3 of them to clients so around 2-3% of deals cashflow in nice area. You have to understand though those other 97% aren't bad or they wouldn't be selling they just aren't for you. Lots of people buy with higher down payments or look more to live in unit and focus on appreciation/paydown/rent growth. 

If property appreciates 2.5% a year at 25% down that's a 10% return. If you are house hacking and put 5% down you just made a 50% return in 1 year. Huge!  

The mortgage principal paydown comes to 5-7% return depending on rate at 25% down. 

 Some good insight on the numbers thank you!

Originally posted by @Caleb Brown :

Like the others say you have to run ALOT of deals to find the good ones. For example Kansas City's market supply is 2.4(anything below 6 is a sellers market) and prices since 2016 have risen 180K-225K. You also have to look at your numbers and adjust to the market. There is a mix of things to look at but don't wait to invest. Always a great time to invest :)

Yes, I am about the mentality of dont wait to invest either.  I think that waiting to time the market only leads to poor decision making!

 

Originally posted by @Victor Vella :

@Antonio Cucciniello

As A full-time investor in Cleveland

I soft appraise 100 houses a month. View 30. Appraise 20. Offer 10. Get 1.

The more you pencil deals, make offers, make mistakes the better you’ll get at creating mental shortcuts.

Market conditions are still in favor of sellers. Buyers are buying owner occupant or investors would prefer real estate vs stocks. Bond yields are getting chased lower and lower by the tide of boomers returning IMO looking for cash flow.

There will come a day again when the buyers seat will rule the market....but damn this is taking forever 😆.

Keep running numbers you’ll get better and faster over time! Golden rule in investing that has served me well...Be patient.

 Be patient to find a good deal? Or act and get in there for maybe a slightly smaller deal? Thats what I have been toying with in my head!

Originally posted by @Frank Wong :

Each market will have a different % of good deals and bad deals. Each market will also be different in what it offers.  Some are cash flow markets some are not. You need to understand what it offers then you can know what a good deal is in a given market.

 Yes, I am starting to realize that now, thank you for your advice!

That should tell you what kind of market where in

“Be patient and wait for a good deal or....”

There is ALWAYS a deal out there. It’s a matter of being flexible, nimble, and constantly scanning.



I am not sure what your strategy is, or if you have a desire to do repairs or renovations, but if you go the off market route you will start off in a much better position both for equity and returns. Everyone is on the MLS looking at those same properties you are. Find a better way, or at least add off market properties to your arsenal at the top of your deal pipeline my friend. By the way, I tried for years to find deals in the northeast (Boston market). It's tough. Long-distance investing can be your friend.

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